Target's Q2 profit drops 6.3%, still beats estimates

Minneapolis Target Corp. reported Tuesday that its second-quarter profit fell 6.3%, but its results surpassed Wall Street forecasts amid cost-cutting and improvements in its credit-card business.

Target earned $594 million in the quarter ended Aug. 1, down from $634 million in the year-ago period.

Total revenue dropped 2.6% to $15.07 billion, still exceeding Wall Street projected revenues of $15.1 billion.

"Second-quarter earnings were stronger than expected due to very strong operating margin in our retail segment and credit-card segment performance in line with expectations," Gregg Steinhafel, chairman, president and CEO, said in a statement.

He added that the company is focused on initiatives to drive customer traffic and sales in its stores while maintaining "disciplined execution in both of our business segments."

Second-quarter gross profit margin rate increased to 31.9% from 31.2% in 2008 due to improvements in certain merchandise categories. Profits from the credit-card business dropped to $63 million for the quarter from $74 million in the year-ago period as a result of lower earnings on the overall portfolio and Target's lower investment in the division's average receivables.

Target sold 47% of its credit-card receivables to JPMorgan Chase in May 2008.